Drillers still facing cash crunch

North American drillers could face a $43 billion cash shortfall this year even with oil prices on the rise, according to a study.

U.S. shale drillers and Canadian producers would need oil prices to skyrocket to $80 a barrel oil to finance operations without borrowing more money or cutting spending by 40 percent, consultancy AlixPartners said in a study released this past week.

The gap in the cash flow they need to keep operating in shale oil patches across the United States isn't nearly as large as it was last year, when AlixPartners said the industry lacked $130 billion with much lower oil prices.

But oil companies that haven't already gone through bankruptcy proceedings or fixed their balance sheet problems by other means are still at a stark disadvantage. These companies have on average $26,000 in debt for each barrel of oil equivalent per day they produce, twice as much as rivals that have already restructured their balance sheets. More than 200 North American oil producers and energy services companies filed for bankruptcy over the past two years, according to Dallas law firm Haynes & Boone.

Despite the influx of optimism in the oil patch, drillers and service companies will likely continue to file for bankruptcy, find other ways to cut debt or sell themselves.

"For those companies that take requisite actions, at long last 2017 could be a year of rebuilding," Bill Ebanks, managing director of AlixPartners' oil, gas and chemicals practice, said in a statement.

AlixPartners also said it estimates oil field service companies that operate on land have seen profitability fall 68 percent over the past three years, even as they cut 250,000 jobs around the world.

Don't expect a full recovery this year, but more of a transition to stronger growth in 2018, the consultancy said.

Energy reporter for the Houston Chronicle. Houston native. Former banking and finance reporter.

Prior to joining the Houston Chronicle, Collin Eaton covered the local banking and finance scene at the Houston Business Journal. Before that, he held internships at newspapers in Texas and Washington D.C., generally writing about business, money or higher education. He graduated from the University of Texas at Austin in 2011.